TIMES ARGUS Legislative Kickoff Coverage

MONTPELIER — An optimistic tone reverberated through the Statehouse on Tuesday as Democratic leaders sought to paint a happy face on the hole in next year’s budget.

Lawmakers returned to Montpelier facing a $75 million shortfall in the fiscal year 2013 general fund. But before the lunch hour came around on their first day back, the Legislature’s fiscal analysts had lowered the gap to about $46 million, thanks largely to revised projections for Medicaid spending.

Even before the gap shrunk, Democratic leaders, including House Speaker Shap Smith, Senate President John Campbell and Gov. Peter Shumlin, had signaled their reluctance to raise taxes to help cover the shortfall.

The rosier budget picture seemed to cement their no-new-taxes resolve.

“I do think that is a solvable problem, and I am even more optimistic than I was two weeks ago,” Smith said after emerging from a nearly hourlong closed-door meeting with Campbell and Shumlin. “I think we can solve the issues we’re facing without raising additional revenues.”

They’ll face a near-constant barrage, however, from a well-organized group of activists that has promised to bring the rhetoric of the Occupy movement to the halls of the Statehouse.

The group, which presented elected officials with a petition signed by more than 3,000 Vermont residents, is an outgrowth of the Health Care is a Human Right Campaign, the coalition supporting single-payer that helped deliver Shumlin an Election Day victory in 2010.

At a noontime rally in the Cedar Creek Room, Peg Franzen, with the Vermont Workers’ Center, said regular Vermonters are finally speaking out against government policies that favor the wealthy and powerful over residents in need.

“Public policy … has served private interests and corporate goals, resulting in a government that has turned its back on the people it is required to serve,” Franzen said to a crowd of more than 100. “Instead of cutting services to match the amount the wealthy are willing to contribute, we must raise the revenue needed to provide services necessary to satisfy the needs of Vermonters.”

James Haslam, head of the workers center, which has organized the “Put People First!” campaign, said the rally Tuesday is a harbinger of things to come.

“We have thousands of people who are committed to supporting these ideals,” Haslam said.

Those ideals center on raising new revenue to bolster programs for low-income residents struggling in a down economy.

“We think if we do our job of getting communities organized, and if elected officials hear from enough of us, they’ll do the right thing,” he said.

They’ll face an uphill battle trying to change the minds of influential lawmakers like Rep. Martha Heath, a Westford Democrat and chairwoman of the House Committee on Appropriations.

Though she wears a “D” next to her name, Heath on Tuesday called herself a fiscal moderate who would resort to tax increases only under grave budgetary circumstances.

“Just to say it’s easy to tax the wealthy and therefore we should — I can understand the appeal of that argument,” Heath said. “But it doesn’t hold sway with me unless they can offer some convincing specifics.”

To date, Heath and other Democrats said, “Put People First!” hasn’t come forward with any specific spending problems it wants to see resolved.

“I would have to have them spell out for me the specifics of what they’re talking about,” Heath said.

So far at least, fiscal talking points have been consistent across party lines.

“I know — it sounds like we’re all saying the same things, right?” said House Minority Leader Don Turner.

Turner said his 48-member caucus’s primary concern heading into 2012 is the budget and fending off any attempts to raise revenues to support increases in it. While he’s happy to devote resources to recovery from Tropical Storm Irene, Turner said, he doesn’t want to see the disaster “become a smokescreen for growing government and increasing expenditures.”

“We don’t want to see people’s empathy taken advantage of to increase government spending in other areas,” he said.

Republicans and mainstream Democrats may be talking a similar game, Turner said, but he’s not sure yet whether to believe his opposition. The more than $20 million in new hospital provider taxes included in last year’s budget — a revenue-raising proposal first introduced by Shumlin — amounts to the kind of “broad-based tax” that Turner is afraid will materialize in the governor’s budget recommendations this year.

“Our words may be the same, but our actions may be different,” Turner said. “I’ve heard the governor saying for a while now that he’s not going to increase taxes, but yet last year he increased taxes on hospitals and, by extension, the people of Vermont. So I hear his words. It’s his actions we’ll be concentrating on.”

Shumlin delivers his State of the State address Thursday. On Jan. 12, he’ll present a budget proposal that he says will balance the fiscal year 2013 budget without resorting to new taxes.

Sen. Randy Brock, the Franklin County Republican who will square off against Shumlin in this year’s gubernatorial race, says that not until that day will lawmakers be able to evaluate the merits of the governor’s 2013 fiscal policies.

“Only with that information in hand are we going to be able to arrive at a conclusion as to whether his solutions are viable,” Brock said.

The $46 million gap in next year’s general fund — the difference between revenues coming in and projected expenditures going out — could fall by an additional $10 million by next week.

Steve Klein, head of the Legislature’s Joint Fiscal Office, told lawmakers on the House Committee on Ways and Means that the administration may look to ax a new mandate that would augment services for children with autism. The mandate, passed in 2009, would add an estimated $10 million in general fund costs.

“The administration may not decide to go forward with the autism mandate as part of its proposal … so that may reduce the gap,” he said.

Finance Commissioner James Reardon said he couldn’t comment on budgetary specifics until after the governor’s address Thursday.

But for Sen. Anthony Pollina, a Washington County Progressive/Democrat, even the possibility of a cut to the autism mandate offers an object example of why the governor must rethink his opposition to raising taxes.

“I mean, that’s incredible, that we would even consider doing something like reducing services for children with autism,” Pollina said.

While Democratic leadership may be resistant to upping taxes on the wealthy, Pollina said he’s talked with a number of rank-and-file lawmakers interested in imposing surcharges on the incomes of people making more than $250,000 a year.

“There is an appetite for this out there,” Pollina said. “The important thing to keep in mind is ‘Put People First!’ does represent the majority opinion. Asking rich folks to pay more isn’t a radical idea.”

Members of the local Occupy movement say the “voices of the 99 percent” will be echoing through the Statehouse again during Shumlin’s State of the State. The central Vermont chapter has invited members from Occupy groups across the state. Organizers won’t interrupt the governor during his speech, organizers say; however, they plan to let lawmakers know what they think of his words.